As open enrollment season approaches, employers and their advisors are getting ready to use the new Summary of Benefits and Coverage (SBC) format required under federal rules. The basic rules have been in place for several years, but 2017 is the first year that health plans must use newly updated templates and instructions to create their SBCs.
This article answers frequently-asked questions about the SBC and what you need to do as the employer sponsor.
1. What is the Summary of Benefits and Coverage (SBC)?
The Summary of Benefits and Coverage (SBC) describes the plan’s benefits and limits, provides contact information, and illustrates hypothetical coverage scenarios in a standardized format. Using templates and instructions provided by federal agencies, health insurers and employers insert case-specific information to create an SBC for their plan. See a sample SBC.
The SBC is sometimes called the uniform four-page summary, although it may be longer due to double-sided pages. The format requires presenting specific information in a specific order which is intended to help employees easily understand the plan’s key features and compare different plans.
2. Who is responsible for the SBC? The insurance company or the employer?
Group health plans are required to provide the SBC to plan participants before enrollment or re-enrollment. For plans provided through group insurance, the insurance carrier is responsible for producing the SBC and providing it to the plan administrator (employer). Both the insurer and employer are responsible for distributing the SBC to the plan participants. Either one may handle the distribution, but the employer needs to ensure it is done.
For self-funded health plans, the plan sponsor (employer) is responsible for producing and distributing the SBC. Most self-funded employers choose to contract with their third-party administrator or claims administrator for this service, but the employer retains ultimate responsibility for compliance.
3. Is an SBC required for every health plan? If the employer offers multiple plans, can the information be consolidated into a single SBC?
An SBC generally is required for any health plan providing medical benefits, but not for plans that primarily provide excepted benefits. For example, SBCs are not required for the following:
- Limited-scope stand-alone dental and/or vision plans;
- Health Flexible Spending Accounts (HFSAs) with little or no employer contribution;
- Fixed-indemnity or specific-disease policies;
- Long-term care, disability or accident coverage; or
- Retiree-only plans.
A separate SBC is required for each health plan that can be chosen for enrollment. For instance, if the employer offers one PPO plan and two HMO plans, there will be three separate SBCs. A consolidated summary describing multiple plans may be helpful to employees, and may be provided in addition to the SBCs, but cannot take the place of the required SBCs.
Different options within a plan can be shown on the same SBC provided the information is clear. For instance, different coverage levels (self/family) or different cost-sharing options (high deductible/low deductible) can be presented in the same SBC as long as the remainder of the coverage information is very similar.
4. Is an SBC required for a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA)?
A Health Savings Account (HSA) is a savings program—not health plan—so no SBC is required. However, a High Deductible Health Plan (HDHP), which sometimes is called an HSA-compatible plan, is a health plan requiring an SBC. Employers that contribute to their employees’ HSAs may want to show that information on the HDHP SBC.
A Health Reimbursement Arrangement (HRA) is a group health plan. In almost all cases, the HRA is integrated with another plan, such as a major medical plan or HDHP. Employers usually choose to include information about HRA amounts, and how they reduce deductibles or other cost-sharing, on the medical plan SBC.
5. What is the deadline for distributing the SBC?
The insurer or employer must distribute the SBC at each of the following times:
- At the beginning of each enrollment period (i.e., when a new employee first becomes eligible to enroll and at the start of each annual open enrollment period);
- Within seven (7) business days of the participant’s request; and
- Within 90 calendar days of a HIPAA special enrollment.
6. Do all eligible employees receive the SBC? What about dependents?
The SBC must be distributed to all plan participants including employees, retirees, and COBRA beneficiaries. Separate distribution for dependents is not required, unless the employer knows that they have a different address.
New hires (or employees newly eligible to enroll) must be given SBCs for all the plans for which they are eligible. At open enrollment, however, enrolled participants only need to receive the SBC for the plan in which they are currently enrolled, unless they request SBCs for other plans.
Also at open enrollment, it is not necessary to provide SBCs to employees who are eligible but not enrolled. Instead, they can be given a notice, such as a postcard, explaining that SBCs are available and how to request them. The Department of Labor (DOL) provides model language for this purpose that the employer may customize for its use:
Availability of Summary Health Information
“As an employee, the health benefits available to you represent a significant component of your compensation package. They also provide important protection for you and your family in the case of illness or injury.
“Your plan offers a series of health coverage options. Choosing a health coverage option is an important decision. To help you make an informed choice, your plan makes available a Summary of Benefits and Coverage (SBC), which summarizes important information about any health coverage option in a standard format, to help you compare across options.
“The SBC is available on the web at: www.website.com/SBC. A paper copy is also available, free of charge, by calling 1-XXX-XXX-XXXX (a toll-free number).”
7. Can the SBC be distributed electronically or are paper copies required?
SBCs can be distributed electronically provided the method complies with the DOL safe harbor for electronic delivery of benefit notices. The usual DOL guideline is a little less strict for SBCs. For instance, if enrollment is conducted exclusively online, SBCs can be provided electronically. Otherwise, for enrolled participants who use a computer as part of their regular job duties, the SBC can be sent to that computer, or it can be posted and a notice sent explaining how to access it, along with information about how to request a paper copy at no charge. For eligible participants who are not enrolled, it is sufficient to post the SBCs online as long as persons are notified of availability (see model notice above). In any case, a paper copy must be furnished upon the participant’s request.
For copies of the new templates, instructions, and related materials, see the following:
- Summary of Benefits and Coverage (SBC) Template | MS Word Format
- Sample Completed SBC | MS Word Format
- Instructions for Completing the SBC - Group Health Plan Coverage
- Why This Matters language for "Yes" Answers
- Why This Matters language for "No" Answers
In summary, employers offering group health coverage are encouraged to work with their carriers and benefit advisors to ensure that SBCs are prepared and distributed according to the federal rules.